This invention relates to a method for automatically identifying and matching buyers and sellers in proposed electronic commercial transactions.
The most basic modern embodiment of electronic commerce consists of a salesman using a telephone and a facsimile machine to negotiate a sale with a customer. In this system, two parties negotiate the various components of the transaction, which may include, among other things, the quantity of goods to be purchased, the performance specifications of the goods, the payment terms, and delivery requirements. If the parties are informed and efficient in their bargaining, a transaction may be completed with one phone call. If there is uncertainty or ignorance on either side of the transactions, several calls may be necessary to complete the transaction. The buyer may take time to solicit other sellers, shopping on the basis of price, availability, quality, and so on. The seller, in the meantime, may have to investigate logistics issues, discount pricing possibilities, or the quantity of the goods in inventory. These activities cost both parties time and money that could be better allocated to more profitable pursuits.
Conventional electronic commerce systems exist to automate the documentation aspects of administering a supply or distribution chain. In a retail sales environment, this means automating order placement and delivery of consumer goods. In an industrial, that is, business-to-business sales environment, this can include automating a buyer's or seller's inventory tracking and establishing electronic systems for electronic order placement to replenish inventory. Modern electronic commerce systems fall into three broad categories.
Conventional systems of electronic commerce fall into three categories based on the metaphor used: Catalogs, Store-and-Searches, and Electronic Data Interchanges (EDIs). Catalogs are systems of electronic commerce that enable vendors to sell their ware to buyers via various public networks, e.g. the Internet. Vendors display product descriptions in a catalog format; then, buyers browse through numerous product descriptions and place their orders electronically. Catalogs offer vendors and buyers the advantage of easy access to one another via one of several public networks. But Catalog systems have the disadvantages of being slow, time-intensive for the user, and burdensome to vendors regarding computational storage requirements. There is no negotiation process between vendor and customer, nor is there a method for automatically matching vendors and sellers.
Store-and-Search systems improve on the Catalog metaphor by using agents to simplify the shopping process. Buyers access agents over a proprietary network and use them to gather product information from vendors. Buyers may then sift through the information, make a purchasing decision, and complete the transaction electronically. Store-and-Search systems operate without monopolizing the users' time because agents perform the shopping function for the users. But Store-and-Search systems can lag in their responses to buyers. Additionally, Store-and-Search systems are processing intensive, impose burdensome computational storage requirements on vendors, do nothing to facilitate negotiation, and operate on a binary match/no match basis which excludes near-matches.
EDI systems consist of private network connections between buyers and vendors. These network connections are usually the product of a well-established relationship between the buyer and the seller. EDI systems do not facilitate shopping or information gathering; rather, they simply expedite order placement; thus, EDI offers few advantages to both buyers and vendors. Buyers can enjoy a customized, automated electronic order system, while vendors can establish predictable sales to existing EDI customers. These advantages come with significant disadvantages, including substantial dollar commitments to create the system, extensive user time commitments, and large computational storage requirements.
Though superior to the phone/facsimile system, these three conventional methods of electronic commerce offer limited practical advantages to their users. They all offer some degree of relief from the technical components of completing a sale. Mundane activities such as order placement or receipt and delivery are common among these systems. However, these systems vary in their sophistication and share common failings. Each system is slow, time-intensive, and expensive to initiate and maintain. Each one requires some familiarity among buyers and sellers to perform a transaction. Finally, these systems fail to provide an efficient, widely accessible, secure, and transaction-driven mechanism for conducting electronic commerce.
Existing electronic systems for selling fungible goods, futures contracts, options, and commodities most closely resemble an auction market. U.S. Pat. No. 3,581,072 to Nymeyer (1971) discloses a digital computer that matches orders and establishes market prices in an auction market for fungible goods. The computer generated automatic market pricing of goods, corrected for unpriced bids, recorded the transactions, and minimized human judgment in price calculations. As disclosed, this system suffers from serious omissions. First, price is the only transaction criteria used to determine compatibility of offers. Second, the computer does not accommodate users' internal computer and telecommunications systems. Third, the system completely omits logistics concerns from the assessment of compatibility. Fourth, the system does not accommodate differing payment terms among various buyers and sellers.
U.S. Pat. No. 4,789,928 to Fujisaki (1988) describes an auction information processing system. It allows buyers scattered over a wide area to participate in an auction in real-time and without gathering at an auction site. Several computers are linked by telephone lines and arranged in a hierarchical structure to expedite data transmission. These data consist of signals from a host to dealers and signals from various dealers and front computers to the host. The host conducts the auction by signaling start times, end times, and sell-offs. The dealer and front computers transmit bid signals from auction participants through several layers of front computers to the host. Product information is stored at the dealer level on laser discs. Price is determined by the competitive bidding occurring at the dealer level.
Like Nymeyer, Fujisaki does not address the other components of the transaction electronically. In an auction market the participants presumably know the rules or have made arrangements for delivery and payment; hence, these considerations are not a factor in the system. The auction market requires some planning as well. Sellers must transmit their product information well in advance of the auction itself. The system is not capable of accepting products for sale in real time. Additionally, the Fujisaki disclosure describes a market where one seller at a time markets to many buyers, and only one transaction may be completed at a time.
Prior art related to automated trading exchanges, like U.S. Pat. No. 4,903,201 to Wagner (1990) match bids to buy and sell on the basis of price and the terms of commodity contracts. Such disclosures are not designed to facilitate contract formation; thus, these disclosures do not provide a means for negotiation of terms. Likewise, such disclosures are not designed to facilitate contract execution. Thus, these disclosures do not provide a means for facilitating performance of a contract.
Prior art related to matching systems, such as U.S. Pat. No. 5,077,665 to Siverman et al. (1991), U.S. Pat. Nos. 4,412,287; 3,573,747; 3,581,072; and 4,674,044 implement matching systems, and Silverman incorporates broadcasting capabilities and suggests their use for disseminating market information.
None of these systems provide for buyer and seller interaction. Nor do these disclosures address the problems of contract negotiation, formation, or performance.